Student loan deferment means that students and lender can make an agreement where the student may minimize or delay the payment of the student loan for a defined period of time. It will keep the loan from being counted as default but could increase the total cost of the loan.
Deferment is a temporary measure and not permanent solution to avoid your student loan.
Key points of Student loan deferment
With student loan deferment you can only postpone your loan payment for up to 3 years as it does not let you escape from your loan.
You must apply (and qualify) for deferment unless you are at least half-time enrolled in education.
Interest on subsidized loans would not accrue throughout deferment.
Student loan deferment varies from lender to lender and it is not sure that all lenders will offer it.
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Deciding to Defer
Before you choose student Loan deferment, you should know the following questions:
Are your loans subsidized federal or Perkins loans?
Interest on subsidized loans and Perkins loans does not accrue during the deferral era. If the loans are unsubsidized or private loans, interest is likely to accrue until you pay for them when in deferment.
Can you afford to make reduced loan installments?
If your financial health is not good and it is tough for you to pay loan payments then deferment is good for you. If you think that long-term lower payments are helpful to you then IBR plan is good for you.
Will you be able to restart payments on your student loans any sooner?
Deferment is a good option if you want to pass out your bad financial phase but in long run if you think it will be tough for you to make payments then deferment is not a good option.
Qualifying for a Student Loan Deferment
Qualifying for student loan deferment needs some planning. It is not so simple like immediately stopping payment on your student loans and declare yourself default. The process includes working with your lender and making an application. Once you will submit the application, your lender will process your application and will contact you in case they need more information and then they will let you know if you qualify for loan deferment. It is very important for you to make timely payments on your loans while waiting for your application to get qualified for loan deferment.
Federal student loan deferment
Most federal student loan deferments require that you apply. There are few categories under which you can directly apply.
In-school student deferment
In-school student deferment plan is an automatic deferment offer and you can apply for it when you attend school for at least half-time. Your student loan can remain pause for at least six months after you graduate or leave school. It happens when you have a subsidized or unsubsidized direct or federal Stafford student loan. You can also ask your school admissions office to send your enrollment information to your loan servicer in case you do not receive automatic deferment.
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Unemployment deferment
Any student who is unable to find any full time job or if a student become unemployed, you can ask for deferment for up to 3 years.
Peace Corps deferment
Any students you are serving in the Peace Corps can get deferment for up to 3 years.
Military deferment
When a student is active in a military service during war, military operation or during national emergency can easily get student loan deferment.
Cancer treatment deferment
Anyone who is a cancer patient with federal student loan debt can request for deferment during treatment or for 6 months after the treatment.
Private student loan deferment
Private student loan deferment varies from lender to lender. Not all of the private lenders provide loan deferment. Although, you need to contact your loan lender for your student loan deferment. Many private lenders offer some form of deferment or relief if you are enrolled in school, serving in the military, or unemployed. There are many private loan lenders that put interest on your loan amount at the end of the deferment period. You can escape this by paying the interest as it accrues.
Also, it is important for students to understand that loan deferment is for temporary financial hardship only.
Conclusion
For those who have federal or Perkins loans, student loan deferment works best for them as these they do not put interest during deferment period. Forbearance should only be considered if you don’t qualify for deferment. Always keep it in your mind that deferment and forbearance are temporary relief and works best only for deferment and forbearance. If you think that your financial condition will not improve in next 3 years then you should choose Income-Based Repayment (IBR) plan. Whatever the case is, you need to reach your loan lender immediately if you face any trouble making your student loan payments.
